Jessica Jaganathan

SINGAPORE (Reuters), – Japanese buyers are searching for LNG cargoes, to make sure they have sufficient fuel to satisfy their heating peak this winter. Industry sources said that the Japanese market is looking to source LNG.

Prices will rise if there is a surge in LNG demand from one the largest importers in the world, at a moment when Europe is experiencing a shortage.

According to sources, these firms comprise utilities and at most one gas company. JERA is Japan’s top power generator and largest LNG buyer and JERA is looking cargoes for December delivery.

JERA spokeswoman declined to comment.

Japan’s Ministry of Economy, Trade and Industry has encouraged power companies in Japan to store up for winter. According to a Japanese source, the electricity reserve rate for next winter will not be high enough to support a cold winter.

Sources said that details of the requirements of these companies, including the overall volume required, were not available immediately as they sought the cargoes privately.

The government reported last week that Japan had a large LNG inventory that was held by electric utilities. This figure is five years high. But, it has been warned that this winter electricity supplies may be tightest ever since the Fukushima nuclear disaster in 2011.

Cold winters could quickly reduce reserves, leaving utilities scrambling for spot cargoes, as traders predicted.

Refinitiv Eikon data showed that Japan’s LNG imports grew nearly 4% in September from 5.5 million to 5.6 million tonnes to become the largest LNG buyer.

According to sources, though, higher oil prices and lower gas prices could limit buyers. Due to a worldwide energy crisis, oil prices reached multi-year records while LNG spot prices reached new heights. Although LNG prices have fallen to their highest levels, they are still more than 400% above last year.

Japanese utilities asked oil refiners to provide extra oil supplies in order to produce power. They are trying to transition from LNG due to high oil prices. But the change will probably be restricted as the use of oil for electricity is usually a last resort.